Business & Finance

Lithium Stocks Could Electrify Your Portfolio

Many investors these days want to add experience of the burgeoning electric-vehicle industry.
Many investors these days want to add exposure to the burgeoning electric-vehicle industry, but discovering the right option can be difficult.

A stock like electric-vehicle giant Tesla (TSLA) – Get Tesla Inc Report is one prospect, although following the stock’s monster rally and subsequent sharp pullback, it’s hard to justify adding the shares right now, given the prospect of more volatility.

An underrated way to play the EV revolution is through lithium stocks, as this scarce metal is crucial to manufacturing the batteries that power these cutting-edge cars.

Demand for EVs is sharp and everything the major manufacturers are investing heavily to increase production. That translates directly to demand for the metal that powers their rechargeable batteries.

There’s also the worldwide give attention to reducing carbon emissions to consider. Vast amounts of dollars in funding from President Joe Biden’s bipartisan infrastructure bill goes to build a nationwide network of EV-charging stations.
And lithium-ion batteries power some of the most popular devices: cellphones, laptops and other portable consumer electronics.

Lithium’s widespread use is nothing new, however the spotlight has been on the metal as demand for it grows quickly. Although it’s not a treasured metal, companies have been quick to mine it as it has become a critical element in several fast-growing markets.

Demand for lithium is likely to keep increasing, driven by the battery-grade metal’s used in electric vehicle production and the telecommunications industry. Lithium-ion batteries are a favored battery technology to power not only EVs but gadgets like cellphones, tablets and laptops because of their high efficiency and energy density.

Before investors rush to include lithium with their portfolios, here’s what you need to know about the commodity and its potential:

Lithium demand is driven by electric vehicles.
Ways to invest in lithium.
Lack of transparency on lithium prices.
Lithium Demand Is Driven by Electric Vehicles
Lithium is mined from the earth’s crust like other metals. Its unique physical properties make it very light, allowing the commodity to be utilized for lots of purposes. A large amount of lithium demand comes from its use in batteries for electric devices. But lithium’s rise in popularity is because of increased demand in the electric auto industry.

As a result, the lithium market size is expected to reach $6.19 million by 2027 after growing at a compound gross annual growth rate of 8.1% from 2021 through 2027, according to a news release by the study firm Valuates Reports.

Lithium became an attractive resource as the price tag on lithium-ion batteries dropped and the technology evolved. However, the price tag on lithium has increased recently due to provide chain disruptions from the pandemic and from increasing demand for the metal.

The leading EV maker, Tesla Motors Inc. (ticker: TSLA), has been ramping up its way to obtain lithium. In November 2021, Tesla signed a contract with Ganfeng Lithium Co. Ltd., the world’s most significant producer of battery-grade lithium. Earlier in 2021, Tesla requested a patent that supports CEO Elon Musk’s pledge to mine its lithium in an effort to lower the cost of manufacturing the lithium-ion batteries used in its electric vehicles, thereby driving down the entire cost of the automobile.

Demand for lithium in addition has come from China as government regulations and initiatives to significantly reduce pollution have encouraged the use of eco-friendly practices like driving electric or hybrid automobiles.

The growth of lithium demand, driven particularly by its role in electric vehicles, is anticipated to bring about new lithium mining and production in more countries.